Earlier this week I had a chance to catch up with a friend and colleague in the surplus and used asset industry. My call to Tom Scanlan, the CEO of Surplus Record was prompted by this article that I saw on Ritchie Bros. Auctioneers, one of the largest auctioneers in the country. Essentially, Ritchie posted a good quarter by selling machinery and equipment, largely Caterpillar equipment, to markets with stronger growth such as Europe (though they are slowing too), Asia and even Canada, according to the article. But contrary to this Forbes article, Tom doesn’t think too many used assets are actually leaving the US market in the form of exports. Rather, these auction houses and used asset dealers are selling more China to China.
China is home to a thriving machine tool industry. In fact, it accounted for 25% of the world’s machine tools, according to this recent article. In reality, China is only buying certain types of equipment such as high precision gear machinery or large presses from the US, some two to three stories high, according to Tom. Instead, some overseas buyers are taking advantage of the weak dollar and are filling containers with more traditional CNC machinery. But the real news is that business is coming back to the US. Those manufacturers who did not sell off their mothballed equipment are bringing it back online. Unless the dollar appreciates significantly, this trend may be here for awhile.
Perhaps the most interesting part of our discussion related to an off-the-cuff question about steel prices. Tom said the high price of steel scrap has had a big impact on his business (which receives its revenue via advertisements or listings of equipment for sale). One of his advertisers had 50,000-60,000 square feet of space which contained only motors. He scrapped them all to China. Though many of these asset dealers and sellers would like to find a ‘productive home’ for their equipment, high scrap prices make the decision a lot harder. There is much less hassle on the sales side by just junking machinery and equipment and the seller can walk away from all of the potential liability issues involved in keeping equipment operational.
What might be interesting to track is the amount of machinery and equipment from China coming into the US…a signal that perhaps more US companies are sourcing locally.